SKS: Will resume operations in AP

On March 18, interim order from SC made clear that no coercive steps could be taken against the co if it complied with Oct 22, 2010 orders

SKS Microfinance Limited, the only listed micro finance institution (MFI) in the country, informed BSE on Thursday that it "intends to carry business in the state of Andhra Pradesh" in accordance to the interim order of the Supreme Court.

In its interim order on March 18, the apex court made it clear that no coercive steps could be taken against SKS if the company complied with the October 22, 2010 interim orders of Andhra Pradesh High Court.

The 2010 interim order of the high court permitted SKS to carry on business by due adherence to Sections 9 and 16 of the AP MFI (Regulation of Money Lending) Act, 2011. The sections prescribe that the interest payable should not exceed the principle amount and provides for penalty for any coercive recovery practices.

The two concerns have already been addressed by the Reserve Bank of India (RBI). Besides, fixing a cap of 26% on interest rate, the RBI had imposed a maximum individual borrowing limit of Rs 50,000. To curb questionable recovery practices, the banking regulator stipulated that all customer connectivity of MFIs should happen at a public place.  

SKS had written off Rs 1,350 crore in AP as non-performing portfolio. The company is now hopeful of recovering a substantial portion of this amount.

Recovery and lending operations of the MFIs have by and large come to a halt in Andhra after the state government promulgated.

"The Andhra Pradesh Micro Finance Institution (Regulation of Money Lending) Ordinance 2010". The ordinance, which had been subsequently enacted, was mainly aimed at curbing what was termed as questionable lending and recovery practices.

Though most of the MFIs in the state plunged into losses following the ordinance, SKS had been the worst affected.

SKS shares were trading on BSE today at Rs 135.10, up 1.01% over the previous day's close of Rs 133.75.